In its latest house price index survey, the building society found house prices rose by 1.6 per cent in August, slowing the year-on-year decline from -6.2 per cent to -2.7 per cent. The average house price now sits at £160,224.
Nationwide chief economist Martin Gahbauer says the three-month on three- month rate of change rose from 2.7 per cent in July to 3.3 per cent in August, the highest level since February 2007.
He says: “The exceptionally low level of interest rates offers some explanation for why house prices have not repeated the very sharp falls of 2008. Mortgage payments for existing homeowners have been reduced substantially – before the Monetary Policy Committee began cutting rates, the average interest and principal payment per mortgage holder represented about 38 per cent of the average income. Following the steep cuts in base rate, this has fallen to just 28 per cent.
“As a result, fewer homeowners are under immediate financial pressure to sell than might have been expected in a recessionary economic background with rising unemployment.”
Moneysprite director,Ashley Brown says: “We are correct to be cautious about the recovery, but we shouldn’t be overly negative about positive news. A point missed by most economists is that banks now have such high margins on mortgage lending that there is plenty of room for manoeuvre when interest rates do start to rise.”
Email Mortgages chief executive Michael White says: “This reflects the improved sentiment continuing to support the market. We have now seen house price increases reported by the Nationwide throughout the summer months, however this is still based on a period of historically low transactional volumes. The market continues to see regular optimistic reports from the estate agent fraternity regarding improved sales figures although the lack of mortgage availability still poses a serious threat to the improving market conditions.”